- (1.) The Delhi Cloth and General Mills Company Ltd. used to manufacture calcium carbide and sell the same in the market till 1967. There are several plants in the factory of the company in which various chemicals are manufactured. There is an independent plant for the manufacture of calcium carbide. Since 1967, the company stopped selling calcium carbide and instead it started using the calcium carbide for manufacturing acetylene gas in their acetylene gas plant. Since the entire quantity of calcium carbide produced by the company is consumed in the manufacture of acetylene gas, there is no question of selling calcium carbide to outside parties. The calcium carbide produced in the company's factory is tapped from the furnace in liquid form and is placed in small trolly trays, where it is allowed to cool and solidify and thereafter it is broken into cakes of desired sizes.
(2.) The contention of the company before the excise authorities and also the High Court was that the calcium carbide manufactured by it was only an intermediary product which was used for generation of acetylene gas in the same factory. This intermediary product cannot be subjected to excise duty for the following reasons:- (1) It is not "goods" as known to the market. By its very properties, calcium carbide in its naked form, turns into dust if it comes into contact with air in the atmosphere due to the reaction of the moisture in the air on it. It can become "goods" only when it attains commercial purity and is put into containers as prescribed by the provisions of Chapter III of the Carbide of Calcium Rules, 1967. The calcium carbide used by the company for the generation of acetylene gas does not comply with these statutory provisions and is not, therefore "goods". (2) Since it is not marketable, its assessable value cannot be ascertained under Section 4 of the Central Excises and Salt Act, 1944 because no such article of the like kind and quality is sold or is capable of being sold. (3) It is not removed by the company from its factory and hence the question of levy and collection of duty on it at the time of its removal does not arise. (4) The calcium carbide plant and the plant for the production of acetylene gas are both situated in one factory of the company. The passage of calcium carbide from the former plant to the latter plant does not amount to its removal from the factory to any other place.
(3.) The Superintendent, Central Excise, Division Kota, by order dated 5th January, 1972, the Appellate Collector, by order dated 25th November, 1972 and the Central Government, by order dated 16th September, 1975, have, however, held that calcium carbide manufactured by the company was assessable under the Central Excise Act. The Company, therefore, moved a writ petition in the Delhi High Court for quashing these orders.;